THE HOME SHOPPER’S GUIDE TO CREDIT REPAIR

If you are in the market for a new home, you are probably no stranger to understanding how important a good credit rating is. Everything from buying a car to low-interest rates on a mortgage, credit knowledge is one area of finance you can’t afford to skip. If you are like many Americans, you may have never received any formal training on finance or how the credit industry works. Many people live outside their means and truly live day-to-day, almost chasing their debt. Understanding credit and how it works may help you to be in a better position to build your dream home, buy a new car, and benefit from low-interest rates and low monthly payments.

Many circumstances can create life changing situations allowing ones credit history to become damaged. Repairing credit can be a daunting task and in many cases there is no quick fix, however time and diligence will help you to round the corner into repaired credit.

Here are a few suggestions you may implement into your credit repair strategy:

  • Check your credit report and score each year.  
  • Review your credit card balances
  • Report discrepancies
  • Pay off debt hurting your credit
  • Report paid balances to the credit reporting agencies

You can receive a free credit report at annualcreditreport.com and you may obtain your credit report free with other companies that offer monitoring services. Choosing an organization to monitor your credit may be beneficial for you, just be aware of charges and read the small print to ensure you are getting what you are looking for out of the arrangement. With identity theft on the rise, many of these companies offer services to help stop people from being victims.

As you review your credit card balances, it is recommended to avoid having high balances on your credit cards. Of course, this is a catch 22, because it is almost a requirement to have credit cards in order to build credit, but the credit agencies really don’t like to see people using them completely – it is recommended that your balance not exceed 30% of your available credit. This is typically known to show discipline and may help improve your overall credit worthiness.

In regards to small collection accounts, pay them. These accounts may hurt your credit score and the sooner you can pay them off the better. In many instances you can contact the collection agency who has bought the debt and arrange to pay a pre-determined settled amount, which is lower than the original debt.  If an agreed amount is reached, make sure you have this information in writing to avoid being responsible for the full payment instead of the reduced amount agreed upon.

Judgments and tax liens can be a little more tedious to remove from your credit, so communication is key when it comes to arranging a debt reduction and following through with your payment plan. Collections and general bad debt is typically reported for 7 years, after which it may be removed from your credit file.  Judgments can stay on your credit report until the debt is paid in full, or removed through the court system. It is generally a requirement to pay off and have judgments removed prior to being eligible for a mortgage.

Even though you pay off your debt, as you work to improve your credit score, you want to make sure you update the credit report agencies with debts you have paid off. They may or may not be corrected automatically and it may require your involvement to get your credit report correct. This process can be a tedious and aggravating at times. There are many companies who will assist you in this process, guiding you through each step and offering tips to improve your overall credit worthiness, however you can choose to handle the process yourself if you are willing to educate yourself with the process.

Either way, be aware of what is on your credit, report discrepancies as you find them, pay off unnecessary debt, reduce your collections and watch your credit score improve over time.

For more information about this topic and how it applies to your new custom home contact us at AmericasHomePlace.com

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